A Do It Yourself Will Gone Bad – Part 1

I recent call I received from Mary illustrates the risks of
do it yourself estate planning. In this
case Mary and john, her husband prepared
their wills using Quicken’s Willmaker software which can be purchased online
for less than $100. It couldn’t be
easier, right? Hiring an estate planning
attorney could cost several hundred to a few thousand dollars, depending on the
particular plan and what it includes, so just comparing the two costs it would
appear that the smart and less expensive move would be to go with the software
program.

As I always point out, however, this way of viewing a will –
as a fill in the blanks document – is dangerous. A last will and testament is a legal document
the product of proper legal advice, which requires understanding the laws of
wills and trusts and then tailoring that knowledge to the particular client’s
needs and desires.

Mary called me because John had recently died and she needed
to probate his will. When I examined it,
however, I found a number of troubling mistakes. First, the will contained a paragraph
specifically referencing IRAs and 401ks and the wish that those assets be left
to Mary. I explained that for tax
purposes these accounts typically have beneficiary designations upon death
which override any instructions contained in a will.

Mary told me that John had previously been married. Upon further inquiry I learned that one of
the IRA accounts listed his child from a previous marriage as the
beneficiary. Although John wanted all
IRAs to be distributed to his second wife, I told Mary that John should have
changed the designation before he died.
This mistake cost her about $100,000, the IRA account balance.
As bad as that
mistake was it gets worse. Next week I’ll
share with you the bigger mistake that John made.